Zeek receiver files documents across U.S., updates case status

Published: Friday, December 7, 2012 at 2:36 p.m.

Last Modified: Friday, December 7, 2012 at 2:36 p.m.

The receiver for the alleged Ponzi scheme, Zeek Rewards, filed case documents in more than 60 federal court districts this week, hinting at where receivership property may be located.

Charlotte attorney Kenneth Bell, originally appointed receiver in mid-August, was reappointed Dec. 4. In his consent motion to the court, Bell said reappointment was necessary to fully comply with federal codes that give him jurisdiction in parts of the nation where receivership property may be located.

Bell said according to federal codes, he had 10 days to file case documents in any court district that could contain property he intends to recover. As of Friday afternoon, Bell had filed the original complaint against Zeek Rewards as well as the order reappointing him receiver in about 63 federal districts across the United States.

Bell, who has already recovered about $300 million in receivership assets from dozens of domestic and foreign financial institutions, said he and his team are now starting to target those who profited from the company.

"I'm pretty pleased so far," Bell told The Dispatch earlier this week. "We are now focusing on claw-back litigation, which is trying to recover funds from people who took out more than they put in, to increase that pool we have and to try to make whole the people that lost money. Once we get into the efforts to recover from net winners, it will be a lot slower."

Bell has been collecting funds connected to Zeek Rewards since Aug. 17, when the U.S. Securities and Exchange Commission shut down the Lexington-based program that was rooted in penny auctions. The SEC, which filed securities fraud charges in U.S. District Court in Charlotte against Zeek Rewards, its parent company, Rex Venture Group LLC, and the operation's former chief executive officer, Paul Burks, alleges that the program was a massive Ponzi and pyramid scheme that raised more than $600 million from more than 1 million users across the world.

The receivership team, which has seized and analyzed "terabytes" of information from Zeek's headquarters on West Center Street in Lexington, has identified more than 2.2 million unique users of Zeek Rewards. About 800,000 of those users lost money through the program, some up to $10,000, Bell said. There are about 100,000 users, or affiliates, who profited, he said.

Bell mailed out 1,200 subpoenas to the top profiteers, most who made more than $100,000, in late October. He said he's received a "mixed bag" of responses.

"Some have objected to the subpoenas and have not provided anything so far," Bell said. "We've had scores of people who have been very cooperative in providing documents and have entered into settlement negotiations."

He added that others have responded by asking for more time to review the subpoenas, telling Bell they intend to cooperate in the future. The receivership team has re-issued subpoenas to those who have objected to the original documents sent out via U.S. Mail, he said.

About 79 subpoenas were sent to North Carolina residents, including 14 in the Triad, Bell said.

"Eventually, we will be sending out more subpoenas to more people," Bell said. "Obviously, on behalf of the vast majority of people, we are going to do everything we can to get money to share out to those who were victims of this."

Total losses were somewhere between $500 and $600 million, Bell said.

Not all affiliates agree with Bell's tactics. Last week, Dallas attorney Michael Quilling filed a motion to appoint a representative for affiliates on behalf of "thousands and thousands" of Zeek profiteers who have challenged the SEC's and receiver's actions since the get-go. The representative, or "examiner," would represent the collective interests of affiliates in the case.

Bell, who said he has until Dec. 17 to respond to the motion, said he is very much opposed to the request.

Bell is expected to file his final liquidation plan later this month, unless the court provides him an extension.

Nash Dunn can be reached at 249-3981, ext. 227, or at nash.dunn@the-dispatch.com.

<p>The receiver for the alleged Ponzi scheme, Zeek Rewards, filed case documents in more than 60 federal court districts this week, hinting at where receivership property may be located.</p><p>Charlotte attorney Kenneth Bell, originally appointed receiver in mid-August, was reappointed Dec. 4. In his consent motion to the court, Bell said reappointment was necessary to fully comply with federal codes that give him jurisdiction in parts of the nation where receivership property may be located.</p><p>Bell said according to federal codes, he had 10 days to file case documents in any court district that could contain property he intends to recover. As of Friday afternoon, Bell had filed the original complaint against Zeek Rewards as well as the order reappointing him receiver in about 63 federal districts across the United States.</p><p>Bell, who has already recovered about $300 million in receivership assets from dozens of domestic and foreign financial institutions, said he and his team are now starting to target those who profited from the company.</p><p>"I'm pretty pleased so far," Bell told The Dispatch earlier this week. "We are now focusing on claw-back litigation, which is trying to recover funds from people who took out more than they put in, to increase that pool we have and to try to make whole the people that lost money. Once we get into the efforts to recover from net winners, it will be a lot slower."</p><p>Bell has been collecting funds connected to Zeek Rewards since Aug. 17, when the U.S. Securities and Exchange Commission shut down the Lexington-based program that was rooted in penny auctions. The SEC, which filed securities fraud charges in U.S. District Court in Charlotte against Zeek Rewards, its parent company, Rex Venture Group LLC, and the operation's former chief executive officer, Paul Burks, alleges that the program was a massive Ponzi and pyramid scheme that raised more than $600 million from more than 1 million users across the world.</p><p>The receivership team, which has seized and analyzed "terabytes" of information from Zeek's headquarters on West Center Street in Lexington, has identified more than 2.2 million unique users of Zeek Rewards. About 800,000 of those users lost money through the program, some up to $10,000, Bell said. There are about 100,000 users, or affiliates, who profited, he said.</p><p>Bell mailed out 1,200 subpoenas to the top profiteers, most who made more than $100,000, in late October. He said he's received a "mixed bag" of responses.</p><p>"Some have objected to the subpoenas and have not provided anything so far," Bell said. "We've had scores of people who have been very cooperative in providing documents and have entered into settlement negotiations."</p><p>He added that others have responded by asking for more time to review the subpoenas, telling Bell they intend to cooperate in the future. The receivership team has re-issued subpoenas to those who have objected to the original documents sent out via U.S. Mail, he said.</p><p>About 79 subpoenas were sent to North Carolina residents, including 14 in the Triad, Bell said.</p><p>"Eventually, we will be sending out more subpoenas to more people," Bell said. "Obviously, on behalf of the vast majority of people, we are going to do everything we can to get money to share out to those who were victims of this."</p><p>Total losses were somewhere between $500 and $600 million, Bell said.</p><p>Not all affiliates agree with Bell's tactics. Last week, Dallas attorney Michael Quilling filed a motion to appoint a representative for affiliates on behalf of "thousands and thousands" of Zeek profiteers who have challenged the SEC's and receiver's actions since the get-go. The representative, or "examiner," would represent the collective interests of affiliates in the case.</p><p>Bell, who said he has until Dec. 17 to respond to the motion, said he is very much opposed to the request.</p><p>Bell is expected to file his final liquidation plan later this month, unless the court provides him an extension.</p><p>Nash Dunn can be reached at 249-3981, ext. 227, or at nash.dunn@the-dispatch.com.</p>